What should an SMB take into consideration when choosing a payroll system? Steve Habel, vice-president at Aspen Avanti Inc., a 20-year-old Calgary-based provider of payroll solutions for Canadian companies, advises SMBs to look at these

issues:

Inside/outside. Decide if you’ll handle your payroll system in-house or outsource it. There are many software vendors to choose from. ADP and Ceridian are the big Canadian payroll outsourcers. Several factors should guide your decision, including your company size, business type and growth rate. You may be able to quickly rule out one of the two options based on your particular circumstances by asking about cost structures up front. Outsourcers typically charge a monthly fee. Software vendors usually charge a one-time fee and sometimes a small annual fee.

Get what you paid for. It’s dangerous to base a software buying decision solely on price. “Payroll software is not like cars,” says Habel. “You can price-shop cars because you can go to dealer A and dealer B and compare apples to apples. You’re never going to find the same software in two places and you’re never going to know what’s under the hood until you actually have it installed.”

Get visual proof. And you’ll only find out what’s truly under the hood after a thorough demo. Ask vendors to demonstrate completion of some of your important processes related to payroll. Don’t just get promises on paper, stresses Habel. “A lot of these people have some pretty smooth demos. Every company has unique needs. Give them your top five and say you want them to show you how they would be done in their software.”

Will everyone play nice together? Payroll can touch a lot of areas, potentially integrating financial, human resources (HR) and outside systems. Don’t be fooled by a vendor who might specialize only in payroll, but “who demos you in HR, when the systems are two separate things. They’ll smoke-and-mirror it to seem integrated.” Many vendors will offer payroll, HR, time capture, and perhaps a Web self-service component. Habel says it can be wise to get most of what you need from one vendor as opposed to buying HR from Vendor 1, payroll from Vendor 2, time capture from a third vendor, then having them all work together to complete the puzzle. Of course if you want to buy payroll only, you can, adding other pieces later.

Watch out for the old “bait and switch” Ask the vendor: Who’s going to do the job? Will the implementation be outsourced? Can I meet the people that will actually do the implementation? “We just got a deal in Ottawa with about a 1,000-person company and we had to do the final demo with the implementation persons there so [the client] could see their personalities and understand their knowledge of the system before they would buy our software,” says Habel. Many big accounting vendors leave the installation to outside parties. “Their prime goal is to get you to sign on the dotted line and grab a licence, and then [you could be] left with a mess during implementation.” Still, some companies enjoy peace of mind by going with a proven, very popular application. Either way, reference checks on the software vendor and/or the implementer are a good idea before big money changes hands.